1.Which of the following statements about short-term decisions is false? a. Shor
ID: 2435312 • Letter: 1
Question
1.Which of the following statements about short-term decisions is false?
a. Short-term decisions are made within the period covered by the current annual budget, generally less than a year.
b. Short-term decisions are derived from the mission statement and strategic plan.
c. Once we develop the annual plan, we make “short-run” decisions to either keep the company on track or to take advantage of unforeseen opportunities.
d. Short-run decisions are usually limited by resource constraints that we can only change over the long run.
e. All of the above statements are correct.
2. Watches Inc. makes a watch selling for $50 per unit. Operating within its relevant range to make 200,000 watches, the unit costs are $10 for direct materials, $7 for direct labor, $5 in variable overhead and $12 in fixed costs. The company is offered a special order for 5,000 military watches that will require an additional $2 each for a special fitting. What is the incremental breakeven cost per unit for the special order?
a. $34
b. $24
c. $22
d. $32
e. None of the above values is correct.
3.Watches Inc. makes a watch selling for $50 per unit. Operating within its relevant range to make 200,000 watches, the unit costs are $10 for direct materials, $7 for direct labor, $5 in variable overhead and $12 in fixed costs. The company is offered a special order for 5,000 military watches that will require an additional $2 each for a special fitting. What should be the special order price per watch for the company to increase its’ profits by $25,000 if it has excess capacity and is still operating within its relevant range?
a. $39
b. $27
c. $29
d. $37
e. None of the above is correct.
Explanation / Answer
1.Which of the following statements about short-term decisions is false? e. All of the above statements are correct. 2. Watches Inc. makes a watch selling for $50 per unit. Operating within its relevant range to make 200,000 watches, the unit costs are $10 for direct materials, $7 for direct labor, $5 in variable overhead and $12 in fixed costs. The company is offered a special order for 5,000 military watches that will require an additional $2 each for a special fitting. What is the incremental breakeven cost per unit for the special order? b. $24 ( $10 for direct materials, $7 for direct labor, $5 in variable overhead – Fixed cost already recovered, so it will not be counted) 3.Watches Inc. makes a watch selling for $50 per unit. Operating within its relevant range to make 200,000 watches, the unit costs are $10 for direct materials, $7 for direct labor, $5 in variable overhead and $12 in fixed costs. The company is offered a special order for 5,000 military watches that will require an additional $2 each for a special fitting. What should be the special order price per watch for the company to increase its’ profits by $25,000 if it has excess capacity and is still operating within its relevant range? c. $29 ($10 for direct materials, $7 for direct labor, $5 in variable overhead - Fixed cost already recovered, so it will not be counted plus $5 for profit (25000 /5000)
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